Court ruling on Box Clever clears way for TPR’s first substantive anti-avoidance hearing before the Upper Tribunal

Court ruling on Box Clever clears way for TPR’s first substantive anti-avoidance hearing before the Upper Tribunal

Ref: PN17-49

Issued: Friday 18 August 2017

The Court of Appeal has rejected ITV’s latest legal challenge in the Box Clever Group Pension Scheme case, which will now move to a substantive hearing in the New Year.

At the end of July the Court of Appeal refused permission for ITV to appeal against a ruling made in The Pensions Regulator’s (TPR's) favour to allow the introduction of new evidence in its anti-avoidance case against the broadcaster.

The hearing in January 2018 will be the first time an anti-avoidance case by TPR has been heard in full in the Upper Tribunal.

In December 2011, TPR’s Determinations Panel concluded it was reasonable to issue a Financial Support Direction (FSD) to ITV. ITV referred this decision to the Upper Tribunal in January 2012 but, since then, TPR has been fighting various legal challenges brought by ITV, which has prevented the case being heard before now.

Box Clever was formed in 2000 after a merger between the TV rental businesses of Granada (now ITV) and Thorn (now Carmelite). Its pension scheme, with around 2,800 members, now has a buy-out deficit of over £90 million.

Mike Birch, TPR’s Director of Case Management, said: "It is vital for us to be able to introduce new evidence where appropriate when we are pursuing anti-avoidance and so we welcome this latest important ruling.

"The ruling also brings closer the prospect of greater certainty for members of the Box Clever Group Pension Scheme which due to legal challenges by ITV has been delayed for six years.

"We have fought at every stage to bring our case for an FSD and are pleased the courts have agreed with our position. This sends a clear message that we will not shy away from pursuing regulatory action to protect workplace pensions."

ITV originally went to the Upper Tribunal in January 2012 to challenge TPR’s determination to issue an FSD and began its challenge of TPR’s ability to submit additional evidence in late 2013.

A number of hearings followed, including an appeal to the Court of Appeal, before the Upper Tribunal found in TPR’s favour in 2016. ITV then made subsequent requests for permission to appeal with the most recent being refused by the Rt Hon Lady Justice Arden at the Court of Appeal. It is the fourth time the courts have considered these issues and agreed with TPR’s position.

In her decision, the Rt Hon Lady Justice Arden stated that: "[The] Appellants fail to advance any argument...which would entitle this Court to interfere." She then confirmed that TPR is not bound by the case it put before the Determinations Panel and is entitled to raise matters not previously raised where a determination is referred to the Upper Tribunal.

The hearing examining TPR’s decision to issue an FSD is scheduled to start on 29 January 2018 and is expected to last for two weeks.

Editor's notes

TPR opened an anti-avoidance investigation following the collapse of Box Clever which was a joint venture combining the rental businesses of ITV (known at the time as Granada) and a number of Thorn entities. Respective employees were transferred to the new company and enrolled in the Box Clever pension scheme which was set up to ensure that those members would continue to receive the same benefits as promised in their former schemes. Prior to the collapse, ITV extracted significant value from the joint venture. Today the scheme has a deficit of over £90 million.

While this will be the first substantive hearing before the Upper Tribunal of the substantive issues in an anti-avoidance case, there have been other referrals to the Upper Tribunal which have concluded through settlement prior to any substantive hearing taking place.

In 2011, TPR issued determination notices outlining why it was reasonable to issue FSDs to five companies that formed part of the ITV Group. A FSD requires its target to propose how they will financially support the scheme. For example, the target could assume responsibility for the employer’s liabilities to the scheme or make a lump sum cash payment into the scheme. If TPR considers that the proposal is reasonable it will issue a notice approving the arrangements.

TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).